Option Trading Project

Option Trading Project for the Course Advanced Data Analytics - HEC Lausanne - Spring 2021

Data

• Download and clean option data
• Keep only stock with a large market cap
• Merge option data, with stock data --> we need to compare the option to the stock to measure returns
• Efficient data-loading (pickle)

Portfolio class

• Cash invested
• Options held
• Trading decisions (buy sell)
• Free cash management

Performance measure

• Returns
• Sharp-ratio
• Alphas <- factor regression and keep the alpha r = alpha + beta_1*mkt + beta_2 * mom + beta_3 HmL +...
• Trading strategies

Define and pre-process/code some features/predictors

Use some ML model to make prediciton about stock --> trade on those signals a) signals about the mean direciton fo the stock, b) signals about specific part of the distributions of asset.

Use ML to define an option-pricing model which is going to price the whole cross section and we buy whatever the algorithm deems underated.